NEWSEC
PROPERTY
OUTLOOK
FINLAND
AUTUMN 2014
NEWSEC IN FINLAND: HELSINKI | TAMPERE | OULU | TURKU | JYVÄSKYLÄ
THE FULL SERVICE PROPERTY HOUSE
CONTENTS
CONTENTS
3–4
PROPERTY USERS’ NEEDS CHANGE THE MARKET
5–6
ECONOMIC OVERVIEW OF FINLAND
7–17
REAL ESTATE MARKETS
18–19
SPATIAL INFORMATION TO BE USED IN THE VALUATION
OF RESIDENTIAL PROPERTIES AND PLOTS
20
INFORMATION ABOUT NEWSEC
21
NEWSEC IN FINLAND
Copyright Newsec © 2014
This report is intended for general information and is based upon material in our possession or supplied to us that we
believe to be reliable. Whilst every effort has been made to ensure its accuracy and completeness, we cannot offer any
warranty that factual errors may not have occurred. Newsec takes no responsibility for any damage or loss suffered by
reason of the inaccuracy of this report. You may use the information in the Newsec Property Update but acknowledgement
must be made for all quotations and use of data/graphics. www.newsec.fi
NEWSEC PROPERTY OUTLOOK FINLAND AUTUMN 2014
2
PROPERTY USERS’ NEEDS CHANGE THE MARKET
PROPERTY USERS’
NEEDS CHANGE
THE MARKET
The intensification of property use has long
been on the agenda of the Finnish property
market. However, only now do companies’
changed working cultures seem to be leading to significant changes in the effectiveness of space use.
Office space is one of companies’ major cost
factors. This is highlighted in Finland, where
the average space efficiency is 25-30 m2 per
employee. The equivalent figure in major European cities is just 15 m2. The difference is
due to factors such as one-person “cubicles”
remaining the preferred ideal in many organisations in Finland. Now this way of thinking is changing, and in addition to companies,
many small municipalities are also trying to
increase the amount of mutual space in their
office, as well as the number of non-personal
work stations.
This is logical, given the significant changes
going on concerning working methods. In replacing traditional open-plan and cubical offices with multi-space office environments, the
space efficiency figure will realistically drop to
12–15 square metres per employee. The first
such confirmed examples of this in Finland are
a good ten years old, when Nokia, for example
reached those limits in their office spaces.
The optimisation of office space solutions is
not just a question of minimisation of costs.
It is also essential that any such space solutions best supports mobile working methods
and strengthens company culture values. If
the company culture has its own specific tight
cooperation and mutual trust amongst personnel, transparency in communications and
an atmosphere that supports innovation,
aims can best be achieved in a space that
NEWSEC PROPERTY OUTLOOK FINLAND AUTUMN 2014
3
PROPERTY USERS’ NEEDS CHANGE THE MARKET
does not isolate people in cubicles or at fixed
work stations separated by screens.
obtained through improvements to energy efficiency, for example.
The above does not mean that almost all organisations need their own workplace peace.
To this end, modern work office spaces include
different kinds of multi-use spaces, as well as
their own quiet rooms to support peace. Each
organisation must take into account employees’ individual needs in the use of the space
and how the whole area is divided.
A regular tendering of property services is
also ideal for helping to optimise space costs.
FROM COST SAVINGS TO
BRINGING ABOUT ADDED VALUE
Office spaces must naturally in every situation
serve the company’s commercial needs or the
community’s core operational needs as well as
possible. It is clear that in the current tough
economic situation properties’ operating costs
also have a greater than ever effect on decisions relating to space efficiency. This has
been emphasised in the recession that has
been prevalent for over five years, starting
from the subprime credit crisis. With increased
cost pressures, even greater attention has
been focused on the fact that the average occupancy rate in Finnish office spaces is just
20–30 %. This shows the occupancy rate during normal office hours, i.e. spaces are used
fairly inefficiently.
At the same time, companies are trying ever
more to focus solely on their core operations.
This creates new demand for expert services
to support an optimal use of the property. With
the use of both these and expert organisations’ property information systems it is easy
to address inefficiencies in space use. This way
the cost savings achieved complement savings
Regardless of all cost savings, perhaps even
more important is what kind of added value
for their operations the property user can get
with their space solutions. Producing this
added value is the main job of expert companies, and also where we are experiencing success. In order to succeed, we must be as familiar with the nature of our client’s operations as possible. This is something we have
tried to maintain.
OFFICES AND COMMERCIAL PROPERTIES DECREASING
The office property related trend, as a result
of which a marked improvement in efficiency
is expected, will keep the amount of new construction of office space at a relatively low
level for the coming years. According to some
planning-need forecasts, there will not be any
need at all for new office space in the near
future. However, client needs change, as a result of which new production of office space
will be required. Building technology in particular is being developed all the time. For example, efficient cooling is currently a clear
client demand in its own right, which it wasn’t
some ten years ago.
The total area of Finland’s building stock is
over 455 million floor square metres. The majority of this is made up of residential properties, which account for the largest proportion
when comparing the combined market values
NEWSEC PROPERTY OUTLOOK FINLAND AUTUMN 2014
of different kinds of properties. In the property market at the moment there is a discernible trend whereby the rents of small residential properties are still rising, whereas the
rents for large residential properties still seem
to be staying relatively unchanged – if anything, they are decreasing slightly.
According to the market value indicator, office
properties account for the second largest proportion – more than retail and industrial properties. The space required by the latter has
been shrinking in recent years. In terms of
retail property, this trend is influenced by both
the mild, prolonged recession, and change factors in Finns’ purchasing behaviour. One element of uncertainty in the retail property
market is the significant growth of online
trade, which has increased caution in particular in the property investment market for the
consumer goods trade.
4
seriously in 2011. This year its market share of
the entire property sales volume has risen to
almost 15 %. Although, at the end of the year
this percentage will fall to about 10 %, as one
of this year’s biggest property transactions
focused specifically on care properties. The
buyer was the Swedish property fund Hemsö,
which took over a care portfolio worth approximately a hundred million euro.
Growth of the care property market is likely to
continue, as the largest post-war population
age groups have not yet reached the age
where they need frequent or continuous nursing services in special care properties.
Overall, expert services, when it comes to
properties, will be needed more urgently than
ever in our diverse markets. We hope that you
find useful information in this autumn’s market
review. We are happy to help with any questions you may have.
Changes relating to international politics have,
at least for now, had a smaller impact on the
commercial property market than online trade
has had. The most significant of these changes, the Ukraine crisis and the ensuing economic sanctions, have for the moment impacted mainly easternmost Finland, with border trade decreasing. Another effect of the
crisis has been that the yields for retail locations that rely on border trade have risen due
to the increased investment risk.
CARE PROPERTIES GROWING
In addition to the residential rental market,
care properties also form another clear object
of growth in Finland’s current property market. This market segment started to develop
Mikko Salla
Managing Director
Newsec Asset Management Oy
Tel. +358 40 567 4407
[email protected]
ECONOMIC OVERVIEW OF FINLAND
NEWSEC PROPERTY OUTLOOK FINLAND AUTUMN 2014
5
ECONOMIC OVERVIEW
OF FINLAND
No real growth has been seen in Finland’s
economy since the summer of 2011. The
weak development of the national economy
is due not only to problems with a lifeless
external environment, in particular in the
euro zone, but also to domestic challenges.
Alongside structural changes in industry
and population aging, Finland’s economy
has been undermined by Russia’s unstable
economic situation. The effects of the
most recent blow were seen as early as the
beginning of the year with Finland’s national economy diving into an even deeper
recession in January–March. Preliminary
data from the second quarter shows that
the decrease is stopping, but the situation
still remains fragile.
depends therefore on export. However, the
beginning of the year, with the unexpected
crisis in Crimea, did not see the desired
upturn. The volume of goods and service
exports decreased by 2 % in the first quarter
from the October–December period, with
both goods and service exports falling. Russia
is Finland’s third most important export
partner, accounting for just under 9 % of
export, and thus recent events have had a
major impact on the development of export.
In January–May the export of goods to Russia
fell by over 13 % from last year, and an upturn
has not yet been seen. The sanctions placed
by the EU and Russia’s countersanctions will
inevitably have a punishing effect on Finland’s export figures this year at least.
GROWTH PROSPECTS REST ON THE
SHOULDERS OF EXPORT
What is noteworthy in the export statistics
from the beginning of the year is the reverse
in the long decline in the electric and electronics industry – we are finally starting to
put the after-effects of Nokia’s crash behind
us. Another positive story was the continued
growth of 4 % in the value of forestry
exports. The export of goods to western
A significant increase in domestic demand is
not expected in the coming years, with pay
rises remaining moderate and employment
levels reducing with the aging of the population. The recovery of the Finnish economy
ECONOMIC OVERVIEW OF FINLAND
Europe is generally growing, but this is not
enough to counterbalance the decrease in
exports to Russia and China. Export to the
USA also suffered at the beginning of the
year, which reflects the challenges the strong
euro brings for Finnish export companies.
Despite Russia’s unstable economic situation
and the euro remaining unduly strong, indicators suggest that trade will take an upturn
towards the end of the year. Industrial confidence has improved since January, and the
technology industry has reported an increase
in calls for tender over three quarters.
However, the clearest sign of a change in fortunes is an increase in new orders in industry
in February–May. Unfortunately the figures
for June were disappointing, which is a sign
of the fragile state of the economy. However,
as the growth of the world economy continues, Finland’s export sector, too, has all it
needs to head in a more positive direction.
This year has seen a slight rise in the volume
of exports, and by next year we should see
bigger growth rates
INVESTMENTS WAITING
FOR BETTER TIMES
Last year fixed investments dropped by almost 5 %. At the start of the year the decrease continued, but not as harshly as before. Weakness in the construction sector was
expected with the fall in building licenses
granted for almost the entirety of last year.
The numbers of licenses granted fell again in
the spring, so the number of new projects
starting can be expected to remain low towards the end of the year. The construction
sector’s situation remains challenging in
2014, and building investments fell in comparison with a year ago, although a small upturn in mood may be seen towards the end of
the year. With the economic decline, companies’ needs for new investments are limited,
and extra capacity is readily available. Machine and equipment investments will only
see steady growth as demand recovers, which
postpones investments until next year. Forestry has reported large new investments,
but the direct effects of these decisions will
only be visible in the investment figures in the
coming years. Confidence indicators predict a
weak year for investment, both for industry
and the construction sector. This year is likely
to be the third year in a row in which investments have fallen. The last decline of this
scale seen by the Finnish economy was in the
early ‘90s. Only next year will growth in export, bottled up investment demand and recovery of the construction sector cause a
small amount of growth in investments.
CONSUMERS CAUTIOUS,
LABOUR MARKETS WEAK
Consumer confidence has remained clearly
weaker than usual. Fear of unemployment,
both personally and on a national level will
continue to curb households’ consumer desire. Such fears are not groundless, as the
condition of the labour market has continued
to deteriorate. With unemployment still growing and purchasing power decreasing this
year and next, consumption can be expected
to remain cautious. Russia’s fall into recession
and the collapse in the value of the rouble
have cut the important purchasing power of
Russian tourists, with the impact felt in shops
in Eastern and Southern Finland, as well as
NEWSEC MARKKINAKATSAUS SYKSY 2014
centres of tourism around Finland. Private
consumption will remain moderate for the
next few years, as low pay increases and a
modest employment situation continue to
squeeze households. Tax increases are increasingly putting the squeeze on purchasing
power, although inflation is remaining close to
just one per cent. Public sector cuts and persistent pressure to make savings are, in turn,
ensuring that public spending will remain
close to zero over the next few years.
THREE BIG CHALLENGES, A SMALL LIGHT
AT THE END OF THE TUNNEL
When Finland joined the euro, concerns were
voiced about the possibility of so called asymmetrical negative shocks, with Finland’s economy being subject to a greater blow than other
currency areas – a blow which a joint central
bank would not be able to soften. Regardless
of the financial and euro crisis, since 2008 Finland has taken three hits, all of which explain
why Finland’s progress has been weaker than
other countries in the euro area:
6
These three shocks simultaneously affected
the state of Finland’s economy and, along
with the financial situation, led to the recession continuing well into 2014. The country is
in for the third consecutive year of negative
growth. On the positive side, the effects of
structural change in industry are gradually
lifting, with Nokia already shrunken while at
the same time the forestry industry is recovering. Important trading partner Russia’s development will remain modest for the coming
years, having a punishing effect on Finland’s
prospects for growth, at least for the time
being. Population aging, on the other hand,
will slow growth as far as into the 2020s’.
The world economy’s positive momentum and
economic growth will eventually have an inevitable knock-on effect on Finland too, signs
of which can be seen in the form of new orders in industry and the stabilisation of confidence indicators. Net exports will set Finland’s economy on a positive track without
any new surprises. The main concern at this
point in time has to do with Russia’s unstable
economic situation, the solution to which is
still not clear.
1. Structural change in industry with the
decline of Nokia and the forestry industry
has proven to be a more painful and more
prolonged turning point than expected.
2. Less surprisingly, Finland’s working age
population, and with it the economy’s potential for growth, has declined from 2010.
3. The latest blow Finland’s economy has
encountered has been the destabilisation of
Russia’s economy due to the situation in
Ukraine.
Juhana Brotherus
Economist
Danske Bank
REAL ESTATE MARKETS
NEWSEC PROPERTY OUTLOOK FINLAND AUTUMN 2014
FOR MORE
INFORMATION
THE LOGIC BEHIND MARKET
AND PROPERTY FIGURES.
Olli-Pekka Mustonen
Head of Research
Newsec Valuation Oy
Tel. +358 44 522 2693
[email protected]
Newsec continues to produce market information in the form of the market review,
providing more transparency when it comes to the property market. We have determined the key property market figures for Finland’s key areas. These are the Helsinki metropolitan area and city centre as well as Tampere, Turku, Jyväskylä and
Oulu. The market parameters show Newsec’s perspectives in terms of average rent,
vacancy, and yield levels, as well as construction.
OULU
DEFINITIONS:
Rent (gross rent):
The rent covering the property expenses.
Gross rent is the total rent paid for the tenant’s
space, this includes compensation for the capital invested in the space (capital costs and
taxes and insurances) as well as maintenance
costs. Gross rent can also include, where relevant, utilities and services costs. The gross
rent does not include value added tax. In everyday language in Finland rent (vuokra) generally refers to gross rent (bruttovuokra).
Vacancy % (vacancy rate %):
The figure that shows as a percentage the proportion of property stock currently vacant in a
specific submarket. The vacancy rate is one of
the most keenly followed property market
figures. (The vacancy rate is calculated by subtracting the occupation rate from the property
stock of a submarket, i.e. 100% - Occupation
Rate)
Yield:
A general term that refers to how the rental
income relates to property prices, based on
market rents at the time of review. Generally
used market figure.
Pipeline (new construction):
Construction that produces new spaces or a
new structure. The figure describes the amount
of stock that is planned to be completed during
the year 2014.
Parameters are based on the information gathered by Newsec.
7
JYVÄSKYLÄ
TAMPERE
TURKU
HELSINKI
REAL ESTATE MARKETS
THE HELSINKI
METROPOLITAN
AREA
Finland’s most active property market is
still centred around the capital region, accounting for approximately 60 % of transactions taking place this year. As before, the
greatest demand for office space is focused
on the centre of Helsinki, but there have also
been signs of a pick up outside this area. In
NEWSEC PROPERTY OUTLOOK FINLAND AUTUMN 2014
terms of residential space, older properties
have also been sold.
Rent development for office spaces remains
modest in certain areas, and rentals generally
require incentives from the lessor, such as rentfree periods or reductions in rent. The trend
amongst office users of space use becoming
more efficient has lead to a vacancy rate of
approx. 12 %, and this shows no signs of improvement in the near future. The difficult rental
situation is reflected in property yields, which
are experiencing upward pressure, in particular
concerning older and weaker property stock.
The best properties in terms of location, occupancy rate, and quality are even more in demand,
but a pick up has also been detected in terms
of secondary properties. Often when properties
have changed hands, the main tenant has signed
a long-term lease. User-owners’ so-called saleand-lease-back arrangements in particular have
been seen recently.
This year’s most significant property transaction took place in March, when Sanoma sold
its current head office Sanomatalo to the
German owned Deka Immobilien’s property
fund, whilst signing a long-term lease for the
property at the same time. The transaction
price was 176 million euro. At the start of the
year Sanoma sold its Vantaa-based production
and office properties to the Swedish firm AB
Sagax. Sanoma will also be staying in these
8
spaces, partly on long-term rental leases.
There has been investment demand for commercial spaces at the edge of the capital region and
beyond. Tenant demand for commercial spaces
has weakened partially; for example commercial
spaces in the centre of Helsinki have become
vacant, and filling them again has been a slow
process. The surge in online trade has made investors cautious, especially regarding spaces for the
consumer goods trade. The Swedish property
investment company Redito bought a grocery
store portfolio covering approximately 10,000 m2.
The transaction included five shops in the capital
region and central area, of which two also featured
filling stations. HOK-Elanto is continuing its business operations in all units.
REAL ESTATE MARKETS
NEWSEC PROPERTY OUTLOOK FINLAND AUTUMN 2014
In terms of residential property, the most significant transaction took place in summer, when
OP-Pohjala’s special investment fund OPVuokratuotto acquired a property portfolio from
Probus Holding. The portfolio featured over 20
entire residential properties containing a total
of 800 apartments and four commercial spaces.
Of these, just over half were situated in the
capital region. Prices of rental residential properties and care properties grew in response to
heavy demand. In the capital region, in particular concerning smaller residential properties,
rent levels are starting to reach pain thresholds
in terms of the tenants’ ability to pay, although
the increase in residential property rents has
stabilised.
9
32,000 m2 of new office space has been completed, with the completion of the final construction work in Töölölahti and the expansion work
at Kampin Huippu. The most significant commercial space projects in Helsinki were the expansion of the Kaari shopping centre in Kannelmäki (approx. 17,000 m2 of new commercial
space) and the renovated space of K-Supermarket that moved into the lower floor of Postitalo
(approx. 3,200 m2). In Tammisto in Vantaa new
space was completed for the XXL store. The
regeneration the shopping centre in Mankka,
Espoo, has seen the modernisation of approximately 8,000 m2 of commercial space. In addition to this, the first phase of the MotorCenter
in Espoonlahti has been completed.
In the capital region this year approximately
AIRPORT / AVIAPOLIS
RENT €/m2/month
Office
PITÄJÄNMÄKI
LEPPÄVAARA
CENTER 2
TAPIOLA
LÄNSIVÄYLÄ
KEILANIEMI
SÖRNÄINEN
Retail
Logistics
VACANCY %
Office
Retail
Logistics
YIELD %
Office
Retail
CENTER 2
15 – 20
7,0 - 11,0
7,1 - 8,6
SÖRNÄINEN
13 – 20
7,0 - 11,0
6,5 - 8,0
PITÄJÄNMÄKI
13 – 17
9,0 - 16,0
7,8 - 9,5
KEILANIEMI
16 – 25
5,0 - 15,0
6,1 - 7,4
TAPIOLA
17 – 20 15 – 25
7,0 - 12,0 0 - 3,0
6,1 - 7,8 6,4 - 7,4
LÄNSIVÄYLÄN VARSI
11 – 15
LEPPÄVAARA
16 – 20 21 – 36
AIRPORT/AVIAPOLIS
16 – 21
21 – 36
13 – 21
Logistics
6 - 9 5,0 - 15,0 0 - 2,0 3,0 - 10,0 7,5 - 8,6 7,2 - 8,0 8,5 - 9,7
5,0 - 15,0 0 - 3,0
6,1 - 7,8 5,1 - 5,9
8 – 10 4,0 - 14,02,0 - 4,0 1,0 - 5,0 6,8 – 7,5 6,4 - 8,6 7,0 - 8,2
PIPELINE m 2
Office
Retail
20 000
Logistics
REAL ESTATE MARKETS
HELSINKI
CITY
CENTRE
Helsinki city centre retains its position as
Finland’s strongest property market area.
The amount of empty office space has grown
in the city centre due to the completion of
the large office buildings in Töölönlahti and
the migration of certain major tenants. Investment demand continues to exceed supply
in good city centre locations, which keeps
yield demands in the centre in check. Demand
for secondary property has perked up since
recent years, and pricing for these properties
has weakened partially. This shows there is
still a difference between primary and secondary properties.
The renovation of the so-called Brondankulma
office building on Eteläesplanadi in the city
centre was completed this year. The property
was renovated completely to meet as many of
the demands of modern office spaces as possible, and in order to reach the BREEAM environmental certification’s good level. Office
space was also renovated in Kamppi, where the
NEWSEC PROPERTY OUTLOOK FINLAND AUTUMN 2014
10
REAL ESTATE MARKETS
NEWSEC PROPERTY OUTLOOK FINLAND AUTUMN 2014
so-called Kampin Huippu underwent major
renovation and was expanded into a modern
office space. Approximately 1,500 m2 of office
space was generated in Kampin Huippu. The
East of the centre saw again some activity
when the publically listed company Amer
Sports’s international head office and sales
company moved to the Vallila Paja Quarters.
The adaptation work created almost 5,300 m2
of new office space.
Competition for good tenants has become
tougher. This is evident from factors such as
rent-free months, tenant renovations, and even
payment of moving expenses. These incentives
are not usually visible in the statistics, which
weakens the reliability of statistics in the current
market situation.
There were changes to commercial spaces in
Helsinki city centre. Whilst most of the work
carried out involves the renovation of existing
stock, some new space was completed in the
area. A new K-Supermarket opened in Postitalo in spring. International operators also appeared in Helsinki’s city centre, such as a Starbucks coffee shop in connection with
Stockmann’s Academic Bookstore, and two
Burger King restaurants, of which the other one
at the Central railway station. Sporting goods
retailer XXL Sports is opening a store in the
Kluuvi shopping centre. Its premises will cover
almost all of Kluuvi’s third floor, and approximately 700 m2 on the second floor.
There were also several transactions with
offices and hotels in Helsinki’s city centre and
the central area. At the beginning of the second
quarter the special investment fund Fennica
Toimitilat I acquired a circular office building
on Paciuksenkatu. The main tenant in the property is McDonalds’ Finland head office.
Senate Properties signed a preliminary agreement regarding the sale of the period property
at Korkeavuorenkatu 21, which was previously
used as an office, to property development firm
Roomy Oy. The firm’s intention is to redevelop
the so-called Ohrana House for residential use
in the style of luxury apartments. For the transaction to go through, parliament’s approval is
still needed, but its value has been given as 21.5
million euro.
11
region went through at the beginning of the
summer, when Aberdeen Real Estate Fund
Finland (AREFF) sold the multi-user office property at Porkkalankatu 5 in Ruoholahti to a fund
managed by AXA Real Estate. The building has
been awarded a Gold-level LEED environmental
certificate and covers 12,000 m2. The price of
the transaction was 41 million euro, or approx.
€3,420/m2. EM Group and Sewatek bought a
property at Yrjönkatu 17, which is functioning
as part of the Scandic Marski Hotel, from
CapMan Real Estate. The property features 67
hotel rooms and 40 parking spaces. The hotel
is operating at the location on a long-term lease.
Many major transactions concerning residential
property also took place in the city centre.
The final significant transaction in the capital
TÖÖLÖNLAHTI
KAMPPI
CBD
RENT €/m2/month
Office
CENTER
RUOHOLAHTI
Retail
Logistics
VACANCY %
Office
Retail
Logistics
YIELD %
Office
Retail
CBD
25 – 31 30 – 115
4,0 - 6,0 0 - 3,0
5,0 - 6,1 4,8 - 5,8
KAMPPI
18 – 25 35 – 120
4,5 - 7,5 0 - 3,0
5,5- 6,8 4,7 - 5,9
TÖÖLÖNLAHTI
30 – 35
CENTER
18 – 25 20 – 38
6,0 - 8,5 1,0 - 4,0
6,0 - 7,2 5,0 - 6,0
RUOHOLAHTI
18 – 23 13 – 24
8,0 - 14,0 1,0 - 5,0
6,3 - 8,0 6,6 - 7,3
4,8 – 5,4
Logistics
PIPELINE m 2
Office
Retail
10 950
Logistics
REAL ESTATE MARKETS
TAMPERE
No significant changes have taken place in
Tampere’s investment or rental markets. In
the investment market there is still interest
in the acquisition of prime properties, but
the demand for such properties outweighs
NEWSEC PROPERTY OUTLOOK FINLAND AUTUMN 2014
the supply. The rental market is still characterised by its slowness.
The City of Tampere, the Finnish Transport
Agency, VR Group and Senate Properties are
holding an international design competition
for the Tampere Travel and Service Centre
and its environs. The aim is to develop the
whole area so that it serves multiple means
of public transport and offers a solution for
housing, office, and service related construction that is in keeping with the cityscape. Four
international working groups submitted their
proposals by the closing date, and the results
will be announced in October 2014.
The Lielahtikeskus shopping centre opened
on time in April and the Solo Sokos Hotel Torni
Tampere located beside the station and owned
by Fennia will open on schedule in October.
The Keskusareena project is delayed. In spring
the city and NCC decided not to continue the
discussion on exclusive rights with Tampereen
Keskusareena Oy, and instead to start the
public procurement process and negotiations
with potential contractors. The aim is still for
work to start in 2016, with the first building
complete in 2017 and the arena in 2019.
Pirkanmaa’s largest property transaction for
many years took place in April, when Sponda
12
Oyj acquired the Tulli Business Park, located
in the centre of Tampere, from UBS Real Estate
Kapitalanlagegesellschaft mbH. The transaction price was just under 64 million euro, or
approx. 3 185 m2. Newsec Advice Oy acted as
advisor for the seller in the transaction.
Technopolis announced it would be carrying
out the final phase of construction on the
Yliopistonrinne office complex. The total area
of the C and D sections is 11,900 m2, which will
increase the total area of the complex to approximately 30,000 m2. The value of investment is 39 million euro.
REAL ESTATE MARKETS
NEWSEC PROPERTY OUTLOOK FINLAND AUTUMN 2014
By giving up plans of a residential development
project, Sandvik’s pension fund and Hartela
are looking for office users into a property
located in Tampella that has been vacant for
years. The office property goes by the name
Pellava and offers after a complete renovation
12 000 m2 of as good as new office space in
the city centre.There have been no significant
changes in either the investment or rental
markets. In the investment market there is
still interest in the acquisition of prime properties, but the demand for such properties
outweighs the supply. The rental market is still
characterised by its slowness. New potential
tenants are few and far between, and they
spend longer making decision than before.
Careful planning and smaller spaces are being
used to make savings.
A major new operator in Tampere is the Norwegian sporting goods retailer XXL Sports &
Outdoor. It will open its first Tampere store
in autumn in connection with Prisma Kaleva.
Its second store will open next year in Lielahti, in the premises previously occupied by
S-Market.
The Prisma centre in Kaleva will be expanding
into a 65,000 m2 shopping centre, according
to currently pending plans, which will make
it and Ratina shopping centre the most significant commercial construction projects in
Pirkanmaa. Ratina shopping centre is still
awaiting a sufficient contract portfolio before
the project can begin.
Newsec’s most significant rental negotiation
was Accountor’s move to Tulli Business Park.
The client, who underwent a name change
during the project, from Pretax to Accountor,
rented approximately 1,500 m2 of space. Also
three of Alston Grid Oy’s offices are to be
merged into one with an autumn move to
premises in the Glaston factory area in Vehmainen. The overall office and production
area totals approximately 2,500 m2.
Office
CBD / CENTER
MESSUKYLÄ
NEKALA
AIRPORT
SARANKULMAPARTOLA
Retail
Logistics
VACANCY %
Office
Retail
Logistics
YIELD %
Office
Retail
CBD
11 – 20 33 – 80
3,5 - 5,5 0 - 3,0
6,5 – 7,8 6,3 – 7,0
CENTER
11 – 19
5,5 - 6,5 1,0 - 4,0
7,7 – 9,2 7,2 – 8,2
14 – 28
AIRPORT
3 – 8,5
NEKALA
6 – 13
SARANKULMA-PARTOLA
6 – 13
HERVANTA
9 – 19
7 – 18
LIELAHTI
14 – 50
8 – 30
KAUPPI
10 – 18
MESSUKYLÄ
7,5 – 13
Logistics
PIPELINE m 2
Office
Retail
4 000
3,6 – 4,4 7,7 – 10,3 7,2 – 9,5 9,0 – 12,3
4 – 8,5 6,5 - 7,5 2,0 - 6,0 3,0 - 3,5 7,5 – 10 7,1 – 9,2 7,9 – 10,2
4–8
MYLLYPURO
HERVANTA
Newsec Advice Oy
markku.turunen(at)newsec.fi
RENT €/m2/month
MYLLYPURO
Markku Turunen
Tampere Regional Director
Tel. +358 40 845 3482
LIELAHTI
KAUPPI
13
6,7 - 7,7 4,0 - 9,0 3,1 – 3,9 7,5 – 10
6,0 - 7,0 1,0 - 4,0
8,4 – 10,1 6 400
7,0 – 7,9 6,7 – 8,6
4–8
3,5 – 4,5
8,8 – 11,7
4–8
3,0 - 8,0 3,0 – 3,5
7,0 – 8,2 8,4 – 10,2
4,2 – 5,5
4–8
11 000
7,0 – 8,3
3,2 – 4,0
8,8 – 11,5
15 000
Logistics
REAL ESTATE MARKETS
NEWSEC PROPERTY OUTLOOK FINLAND AUTUMN 2014
The Raisio Regional Education and Training
Consortium bought at the beginning of the year
just under 3 500 m2 of office space at Purokatu 1 near the surgical hospital from RandH
Kiinteistöt II Oy. In June Isku Invest Oy sold 7
400 m2 of retail space in Pläkkikaupunki to
Kiinteistönpaikka Oy at the transaction price
of 5.3 million euro. In the latest transaction
Turun Teknologiakiinteistöt bought the Triviumoffice building in Kupittaa, completed 2002,
which comprises 8 700 m2 office space.
TURKU
In what comes to significant property transactions, the first half of year 2014 has been
relatively quiet in Turku. Three significant
transactions have been made and buyers
have been local actors.
Several construction projects have been completed in the Turku region, although the construction pipeline has decreased from the year
before. Approximately 7 500 m2 of office space
was built in Kupittaa with the Intelligate Phase
II. This year two bigger projects have been
completed: Nereis Business Garden in Pitkämäki the main tenant being shipbuilding
industry’s consulting firm Deltamarin, and
Skanssi Retail Park with the main tenants Asko
and Sotka.
Mainly residential buildings are under construction in the Turku region at the moment.
The only significant commercial projects are
Shopping Centre Mylly’s extension and
Logomo Konttori, which will almost double
its spaces to approximately 9 000 m2 after
completion of the construction.
Many new projects are planned, but still fewer
in amount compared to other major cities in
14
Finland. Construction of the planned High Tech
Centre IV is likely to start in the first half of
2015. Next year also the construction of
Kaarina Retail Park’s first phase is planned to
start and the Kaarinanportti Shopping Centre
in two years. In addition plans are considered
concerning Satamakolmio located in the
harbour, Intelligate’s third phase in Kupittaa,
Kuninkoja Retail Park as well as Koy Turun
Vaskikatu 1’s first phase.
The ownership arrangement of the Turku shipyard that was published in summer and recent
ship orders have a positive impact on the local
consumer and investor confidence and might
thus reflect on the real estate investment
market as a slight pick-up.
AIRPORT
ORIKETOMETSÄMÄKI
RENT €/m2/month
Office
CBD / CENTER
PANSIO
HARBOUR
KUPITTAA
SKANSSI
Retail
Logistics
VACANCY %
Office
Retail
Logistics
YIELD %
Office
Retail
CBD
10 – 19 30 – 75
3,0 - 7,0 2,0 - 3,5
6,7 - 7,6 6,0 - 7,0
CENTER
10 – 15
3,0 - 10,0 2,5 - 8,0
7,2 - 8,8 7,2 - 10,0
12 – 30
Logistics
4 000
AIRPORT
5–9
2,0 - 4,0
9,0 - 12,3
ORIKETO-METSÄMÄKI
4–7
8,0 - 12,0
9,0 - 12,6
KUPITTAA
13 – 17
9 – 20
4,0 - 6,0 1,0 - 8,0
6,9 - 9,0 7,0 - 10,0
SKANSSI
9 – 13
20 – 45
8,0 - 10 ,0 3,0 - 5,0
8,0 - 9,3 6,8 - 7,5
PANSIO
HARBOUR
7 – 13
PIPELINE m 2
Office
6 – 10
1,0 - 2,0
8,5 - 12,1
6 – 10 8,0 - 12,0
1,0 - 2,0 8,5 - 12,0
9,0 - 12,1
Retail
Logistics
REAL ESTATE MARKETS
NEWSEC PROPERTY OUTLOOK FINLAND AUTUMN 2014
JYVÄSKYLÄ
The property transaction market in Jyväskylä has been quiet during this year.
Several retail space projects are planned,
but the schedules are still unclear.
Lemminkäinen Talo Oy sold two housing companies located to the South from the city centre
to the fund LähiTapiola Asuntorahasto. Other
larger property transactions took place last
year, when the special investment fund EQ
Hoivakiinteistöt acquired Kiinteistö Oy Vaajakoskentie 56 for 1.2 million euro and when Kiinteistö Oy Vaajakosken Tikkutehtaantie 1
changed hands within Sponda. The latter transaction took place in October for a transaction
price of approx. 1.7 million euro.
The Innova 4 office building being built in
Lutakko is due for completion soon. Development in the Lutakko area has been ongoing for
many years. The area features a modern new
district which is home to plenty of residential
properties, office space and commercial space,
and its location close to the railway makes it
attractive. New modern office premises are
still in demand in the rental market, and vacancy
rates have remained at a reasonable level.
Skanska is currently developing the Seppä
shopping centre in Seppälä. The centre is due
for completion in spring 2016 and will feature
approx. 24,000 m2 of rentable space. SRV is
planning another shopping centre in Seppälä,
which will go by the name Seppälänportti, and
will feature approx. 20,000 m2 of retail space.
15
The Eteläportti shopping centre is being
planned for the Keljo area South of Jyväskylä,
which will include 50,000 m2 of retail premises
and nearly 3,000 parking spaces. A new automotive complex called MotorCenter is also
being planned for the area. The projects in
Seppälä and Keljo are mainly still at the planning stage, but they are an indication of the
planned development in Jyväskylä.
PALOKKA /
KIRRI
SEPPÄLÄNKANGAS
RAUTPOHJA
VAAJAKOSKI
RENT €/m2/month
Office
CBD/CENTER
YLISTÖNRINNE /
MATTILANNIEMI
Retail
Logistics
VACANCY %
Office
Retail
Logistics
YIELD %
Office
Retail
CBD
12 – 22 20 - 60
2,0 - 5,5 2,0 - 4,0
7,0 - 8,5 7,0 - 7,5
CENTER
12 – 18
2,0 - 6,5 2,0 - 4,0
8,5 - 9,3 7,3 - 7,8
15 – 25
PALOKKA / KIRRI
14 – 16
SEPPÄLÄNKANGAS
6 – 13
RAUTPOHJA
9 – 14
YLISTÖNRINNE /
MATTILANNIEMI
14 – 19
VAAJAKOSKI
7 – 13
4 – 5,5
5–9
4–8
3,0 - 5,0 4,4 - 6,5
7,8 - 8,5 10,0 - 12,0
3,0 - 7,0
8,0 - 12,0
5,0 - 8,0
2,0 - 4,0 9,0 - 10,5
5,0 - 9,0
7,8 - 9,5
7,0 - 10,0
Logistics
5,0 - 7,0 10,0 - 11,5
9,0 - 11,0
9,0 - 11,0
PIPELINE m 2
Office
Retail
Logistics
REAL ESTATE MARKETS
OULU
The property transaction market in the Oulu
region has remained quiet during the first
half of 2014. Transactions made were few
and far between, although there is sale interest in the air. From an investor perspective,
properties in Oulu and its neighbouring municipalities interest primarily local investors
and domestic institutions. Demand from
foreign operators for investment properties
is still low in Northern Finland.
Broadcom, which develops wireless modem
products in Finland is to cease its Finnish operations, resulting in approximately 430 job
losses in Oulu. In addition to this, Microsoft is
to close its research and product development
unit in Oulu, which had provided jobs for approximately 500 people. Both American companies have been renting space from Technopolis Oyj. These recent lay-offs among
experts in Oulu’s IT sector will free up office
space and contribute to the cautious investor’s
view of office property.
In terms of retail and residential space, several
construction and development projects are
underway. The retail cooperative Arina is currently building a shopping centre called Valkea,
which is already at the structural work stage.
In accordance with the City of Oulu’s MALI 2020
NEWSEC PROPERTY OUTLOOK FINLAND AUTUMN 2014
16
REAL ESTATE MARKETS
NEWSEC PROPERTY OUTLOOK FINLAND AUTUMN 2014
plan, Rotuaari is being expanded and Isokatu
transformed into a pedestrian street, remaining
partly within the shopping centre. The construction on the new hospital, which is on Kauppurienkatu and owned by Ilmarinen who will rent
it the Mehiläinen, is already in the final stretch.
In many of the commercial blocks in the centre
change is underway concerning zoning plans,
in which the increase in the number of residential properties is a growing trend. In the centre
of Oulu it is likely that the future will see increasingly higher residential buildings. The
construction of tall buildings is changing Oulu’s
streetscape, as demonstrated by the 12-story
YIT Resiina building. The city centre is likely to
become even more attractive with the onschedule Kallioparkki Kivisydän. The car park
being built 30 metres under the centre of Oulu
is scheduled to open in summer 2015. The
parking solution also serves the development
of the travel centre in the station area, which
is currently delayed.
Finland’s second Ideapark is under construction
into a former furniture store in Ritaharju. The
centre covers approx. 24,000 m2 and is located
approximately six kilometres from the centre
of Oulu. Ideapark will open to the public in
October 2014. Tenants will be international and
LINNANMAA /
UNIVERSITY
domestic fashion and leisure brands. Swedish
clothing chains in particular have published the
news that they have signed property rental
agreements.
17
change for the current increasing office
vacancy problem.
Rent levels in euros for retail and office properties are currently estimated to be lower than
they were half a year ago, but the vacancy rate
is expected to increase. Compared to Finland
on the whole, growth in rents for residential
properties has been more moderate. The Pyhäjoki nuclear power plant project is being
followed closely, and its area of influence is
estimated to be wide geographically speaking,
which may prove to bring about a positive
Mia Runtti-Manninen
Service Manager
Newsec Asset Management Oy
Puh. +358 50 466 5623
[email protected]
RUSKO
RENT €/m2/month
ALPPILA
Office
CBD / CENTER
KONTINKANGAS
NUOTTASAARI
AND HARBOUR
Retail
Logistics
Retail
Logistics
YIELD %
Office
Retail
CBD
10 - 18 35 - 80
2,0 - 8,0 2,0 - 4,0
7,0 - 9,0 7,5 - 9,0
CENTER
9 – 13
5,0 - 9,0 2,0 - 8,5
7,8 - 10,5 7,5 - 10,5
KONTINKANGAS
10 - 15
2,0 - 6,0
8,0 - 10,0
ALPPILA
7 – 13
4 – 8 7,0 - 10,0
4,0 - 9,0 8,0 - 10,5
9 – 24
LINNANMAA/UNIVERSITY 7 – 13
LIMINGANTULLI
VACANCY %
Office
Logistics
9,6 - 12,2
6,0 - 25,0 3,0 - 9,0 2,0 - 7,0 8,0 - 12,0
RUSKO
7 – 13
9 – 15
4 – 8 4,0 - 10,0 4,0 - 8,5 1,0 - 9,0 8,0 - 10,5 8,1 - 10,2 9,0 - 10,2
LIMINGANTULLI
7 – 13
9 – 15
4 – 6 4,0 - 10,0 5,0 - 8,5 2,0 - 8,0 8,0 - 10,5 8,0 - 10,2 9,5 - 11,2
NUOTTASAARI
5–8
1,0 - 5,0
9,0 - 9,5
HARBOUR
5–8
1,0 - 5,0
9,0 - 9,5
PIPELINE m 2
Office
Retail
5 000
22 500
Logistics
SPATIAL INFORMATION TO BE USED IN THE VALUATION OF RESIDENTIAL PROPERTIES AND PLOTS
NEWSEC PROPERTY OUTLOOK FINLAND AUTUMN 2014
SPATIAL INFORMATION TO BE
USED IN THE VALUATION OF
RESIDENTIAL PROPERTIES
AND PLOTS
Being able to assess residential properties
and plots requires high-level expertise.
Successful application of this requires
good market knowledge and valuation expertise, as well as mathematical analyses.
At Newsec we have had numerous successful examples of this over the last years.
Analyses are based on a method we have
developed, which allows for the price of
plots for apartment blocks and row houses
to be reliably estimated based on actual
property transaction prices. The analysis
can, if necessary, be broadened to include
unplanned areas outside of current residential areas.
For the valuation of individual residential
properties – as with large numbers of properties – the most effective method is clearly the
sales comparison method. This is because
there is an abundance of information available
about actual sales. However, this statistical
information is not enough on its own if a valuation of an entire apartment block or portfolio
is needed. There are many examples of this, in
terms of the valuation of a large amount of
properties owned by both individual investors
and cities, as well as ones managed by other
professional property owners, in particular in
the capital region and other growth centres
in Finland.
Sales comparison, income capitalisation or
cost approaches can be applied to the valuation of properties. Commercial properties are
most often valued using methods based on
returns, as property investors’ decisions are
based on factors such as future return prospects, and because comparable sales are
scarce.
In order to carry out a professional residential
property valuation, market information affecting individual transactions must be analysed.
For this, regression models to interpret property prices are applied, as these models have
been calibrated to interpret the residential
property market in each city. This allows the
importance of the property’s features, and in
NEWSEC VALUER IN APG TRANSACTION
Price models are also of use to buyers of large collections of
residential property, such as the Dutch group APG in its
acquisition of SATO shares. In this transaction Newsec valued
the prices of the apartments on behalf of the buyer.
18
SPATIAL INFORMATION TO BE USED IN THE VALUATION OF RESIDENTIAL PROPERTIES AND PLOTS
particular its location, to be managed, with the
help of spatial information. The income capitalisation method, which is based on rents,
is applied alongside the sales comparison
approach in the valuation of residential
properties.
MIGRATION AS A DYNAMO FOR THE
PROPERTY MARKET
Migration within Finland, in enhancing growth
centres and in particular the capital region,
has intensified in recent years to levels not
seen since the 1960s. Every year approximately 260,000–270,000 Finns move to a new
place of residence, most often due to work.
Here, too, the eternal question pops up again;
which came first – the chicken or the egg, or in
this case, the labour market or the property
market. I believe there is a clear answer: the
labour market. People move because of work,
and the property market must adapt to this.
Part of the residential property market has
adapted, part has not. Predictability is to some
degree facilitated by interest levels in all EU
countries remaining at historically low levels
for a long time. The cause of this is clear:
taking control of the international banking
crisis. This has contributed to there being very
little change in residential property price
levels in Finland, with a maximum change of a
few per cent per year.
Massive investments in rail transport infrastructure – for example in the metro in the
capital region and the planned tramlines in
Turku and Tampere – are improving the competitiveness of urban areas in the long term.
In the short term, investments have a moder-
ate effect in raising demand and prices.
However, neither this nor increasing supply in
many parts of the capital region will have a
decisive effect on residential property price
levels. In such cases, the analysis of microlevel factors is emphasised in the valuation of
residential properties.
MANAGEMENT OF VARIABLES WITH
MODELLING
If individual actual residential property sale
prices and the accuracy of predictions in set
geographical areas are examined, the accuracy can be fairly high without sophisticated
analysis. In such cases, having a “predictor”
who is a qualified and experienced estate
agent and who has worked in that geographical area for a long time is sufficient. However,
the bigger the area in question, or the larger
the amount of residential properties to be
valued is, the greater the need is for analyses.
If, in connection with a portfolio valuation,
conclusions are reached based on individual
cases and without using analyses, there will be
too many potential sources for error. This does
not mean, however, that all statistical information gathered should be used. In actual fact,
this information forms the key basis of the
sale price method. However, the maximum
benefit can only be drawn from statistical information when sophisticated mathematical
methods are applied – in this instance regression analyses are particularly important.
Of course managing these methods in detail
yourself is not a prerequisite for working in
the market. It is, however, useful to know that
they can and should be used. Thus, in addition
NEWSEC PROPERTY OUTLOOK FINLAND AUTUMN 2014
to individual residential properties, the likely
effect of the age of a wider residential property mass on value can also be reliably determined, for example. One such report was
carried out for the city of Vantaa, where the
market prices of plots for apartment blocks
and row houses were worked out with the help
of residential property market modelling and
the relative prices of residential properties
and plots.
In addition to the age of the residential properties, a large number of other variables naturally also have an impact on prices. The condition of the property is one variable that
doesn’t require further explanation. The location of the property, however, has the greatest
effect on the transaction price. The mathematical analysis of the effect of the location is
more complex than of age or condition, for
example, but it is possible – thanks to modelling based on spatial information. Proximity to
the sea, for instance, which has been shown to
have an absolutely key influence on the sale
price, is carefully taken into account by the
sophisticated information systems. The modelling takes into account actual distances
based on the transport network.
19
residential property transaction prices. As
the material in question “behaves” irregularly
and does not follow any regular mathematical
distribution exactly, there will always be an
element of uncertainty. True expertise is the
ability to be aware of this – and to be able to
differentiate between the essential and the irrelevant in any given situation.
Migration in Finland from the peripheries to
growth centres does not show any signs of
slowing. It can also be assumed that the culture of construction and development will
continue to follow gradually adopted practices, which for the most part can be seen in a
positive light. This suggests that the residential property market, especially in growth centres, will remain hot. Such markets require an
expert grasp to help professional developers’
and investors’ make successful decisions.
When this happens, the market works towards
a common goal: the right amount of accommodation at the right price and available
where it is needed.
COMPARISON TO STATISTICS INDICATES
FUNCTIONALITY
We have compiled years of statistics concerning actual residential property sale prices,
and compared them to the modelling-based
forecasts we drew up. The correlation has
proven to be excellent. We can be as bold as
to state that with our market information and
location management based model, we can
account for at least 80 % of the variation in
Jyrki Halomo
Senior Analyst
Lic.Sc. (Tech), AKA, MRICS
Newsec Valuation Oy
Tel. +358 (0)40 837 3796
[email protected]
FOR MORE INFORMATION ABOUT NEWSEC
FOR MORE INFORMATION
ABOUT NEWSEC
NEWSEC PROPERTY OUTLOOK FINLAND AUTUMN 2014
20
NEWSEC
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Kai Keituri
Hannu Ridell
Newsec companies in Finland
Newsec Valuation Oy
Tel. +358 400 400 930
Tel. +358 50 559 5527
[email protected]
[email protected]
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